My Lords, the Government have no immediate plans for legislation on local government taxation. However, we have established the balance of funding review to consider possible reforms to the current arrangements. The review will consider possible options for change in the course of the next few months. It is due to report in the summer.

My Lords, I thank the Minister for his Answer. Does he agree that the level of council tax, which is up by 70 per cent since 1997, is reaching the limit of public acceptability, so that even pensioners are going out on to the streets to protest?

My Lords, no one can argue with the figures, but I have nothing really to add to what I said. We have set up the balance of funding review; it is looking at possible reforms; and it will report in the summer. No doubt there will be public debates about the issue. We have given significant extra sums to local government in real terms over the past few years and a substantial sum for the next financial year—some £3.6 billion extra.

My Lords, does the Minister agree that, now that about 80 per cent of local government expenditure comes from central government or specific grants, there is a danger that local government will become little more than the agent of central government, at the expense of a democracy that we should cherish?

My Lords, does the Minister agree with the Local Government Association that council tax distorts accountability, is not fair and cannot meet demand? Can he confirm that the review of local
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government finance that the Government are undertaking will consider in some detail the local income tax options?

My Lords, I hate to be boring about it, but I do not have a great deal to add to what I said in my original Answer. A balance of funding review is already under way. It is considering a range of options, and we will report in due course.

My Lords, the Minister said that, over the past few years, local government had been given many extra millions of pounds. However, as he will know, the Audit Commission report that came out just before Christmas put the blame fairly and squarely on the Government for the enormous rise in council tax last year, caused by the redistribution of grant.

Over the past few years, the Government have required local government to do more and spend more than is allowed by the grant that it is given. They have used that as a stealth tax. What will the Government do in the short term to address that problem? It cannot happen; it is unacceptable to the public. The council tax cannot be used as a substitute for income tax.

My Lords, it is worth pointing out that we have increased the grant to councils by 30 per cent in real terms since 1997, compared to a 7 per cent cut under the four years of the previous government. For the next financial year—the one that really counts—the increase for local government will be £3.624 billion. That is an increase of 7.1 per cent, and we therefore expect council tax increases in low single figures.

My Lords, it would be wrong to pre-empt the balance of funding review. It may come up with a range of options or one option; I do not know. Some things can be changed by secondary legislation, and some would require primary legislation. It depends on which way forward we choose to go, with the approval, obviously, of Parliament.